ECB ready to liquidate ABLV of Latvia after US claims lender involvement with North Korea
European authorities moved to liquidate Latvia’s ABLV Bank after clients pulled assets from the lender following accusations from the US that it laundered money for North Korea.
The European Central Bank, which had already placed a freeze on payments by the lender, said that ABLV was failing or likely to fail, handing it to Europe’s Single Resolution Board.
That authority said a resolution of the bank, which generally means a sale or restructuring, is not in the public interest because neither ABLV nor its Luxembourg-based subsidiary provide “critical functions” and their failure will not have a “significant adverse impact” on financial stability.
ABLV was plunged into crisis after the US Treasury Department this month proposed to ban it from the American financial system, saying it helped process illicit transactions, including for entities with alleged ties to North Korea’s ballistic missile programme.
The bank responded by saying the allegations are wrong and that it was working to provide information that would help to overturn the proposal.
“The bank is likely unable to pay its debts or other liabilities as they fall due,” the ECB said yesterday in Frankfurt. “The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian deposit-guarantee fund starts.”
ABLV took a different view, saying it accumulated more than €1.36 billion ($1.67bn) over four business days to strengthen its liquidity and ensure 86 per cent of its demand deposits.
“The bank considers that it has fulfilled all requirements of the regulator in order to resume operation,” ABLV said.
“It was absolutely sufficient for the bank to resume executing payments and meet all obligations toward its clients, yet due to political considerations the bank was not given a chance to do it.”
On Friday, Latvia’s central bank said it tripled emergency liquidity assistance to ABLV after input from the ECB and local regulators.
The ECB had asked Latvia’s Financial and Capital Markets Commission to impose a moratorium on ABLV, which meant the bank was barred from making payments on financial liabilities including deposits until further notice.
The measure, a first for the ECB, was necessary to stabilise outflows after a “significant deterioration of the bank’s financial position”.
Deposits and securities worth €600 million, equivalent to 18 per cent of ABLV liabilities at the end of September, were withdrawn after the US Treasury announcement, Peters